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Q1 2023
Performance Statement
During the first quarter, the Mackenzie Global Women's Leadership Fund underperformed the MSCI World Index (World Index).
Investment Strategy
A global large cap diversified equity strategy guided by the Impax Gender Score, the portfolio seeks to invest in the highest-rated companies in the world for advancing gender equality and diversity in the workplace. The strategy utilizes the Impax Gender Score to systematically identify and invest in companies that value gender-diverse leadership teams and promote gender diversity on their boards, in executive management and through other policies and practices. The portfolio’s systematic investment process overweights the highest-rated gender leadership companies, as determined by the Impax Gender Score, regardless of their market capitalization, and manages risk by implementing constraints at the sector, region, country, and individual security levels relative to the World Index.
Market Review
Equity and bond markets gained over the quarter despite continued market volatility. Regional bank failures in the US and difficulties at Credit Suisse in Europe were shrugged off by markets after policy makers moved to stem fears of contagion. However, the real story in markets continues to be about inflation, rising interest rates and the potential impact on the real economy. The market has swung between optimization that the rate cycle in peaking and concern that central banks will continue to raise rates too far as they attempt to combat inflation. The recent banking turmoil has led to tighter credit markets, and this could lead to the desired outcome of slower growth without further steep rate hikes. This is certainly what the bond market is signaling, as the yield curve remains sharply inverted. Economic data has been mixed over the period, but manufacturing PMI sentiment surveys have turned positive in most countries. Consumer and job data in the US, until very recently, has been better than expected. However, housing, construction and commercial real estate are potentially at risk from tighter credit and higher rates, and this has reignited concerns of a recession. For investors focused on sustainable investments, policy support continues to provide tailwinds in some areas. Demand from the Inflation Reduction Act (IRA) appears to be feeding into some companies order books. The EU response to the IRA, The Green Deal, sets out ambitious targets to scale up net zero manufacturing in the region, although attention is focused on member state reactions on financing and details on the proposed EU sovereignty fund.
Impax Gender Score Attribution
The portfolio’s underperformance was attributable to security selection and was driven by stock-specific effects rather than underlying sector or regional themes. Nvidia and Tesla, two companies that are not in the top 25% from a gender diversity perspective and not held in the portfolio, were among the best performing stocks in the MSCI World over the reporting period and not owning these securities was hurtful to performance. Within the Gender Leaders universe, not owning Meta Platforms, and overweighting Elevance Health, DNB Bank, American Water Works and Royal DSM also contributed negatively to performance. This was marginally offset by positive contributions from Telenor SA, Auto Trader Group and Schneider Electric.
Sector Commentary
Sector positioning is an outcome of the portfolio construction process rather than an active portfolio decision. Despite the portfolio’s avoidance of Energy, which positively contributed to Fund performance, sector positioning marginally detracted in the first quarter. The portfolio’s overweight to Consumer Discretionary and underweight to Real Estate also contributed positively to performance, while its overweight to Financials, Consumer Staples and Healthcare were mild headwinds.
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